If the required yield drops to 6 instantaneously so the


You own two $1,000 par bonds, one in this problem and one in the next. I want to illustrate something else. Both of these bonds are zero coupon bonds, which simply means they pay no coupon.  The first bond matures in 2 years, and yields 6%. If the required yield drops to 6% (instantaneously, so the maturity does not change), what is the percentage price change?

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Financial Management: If the required yield drops to 6 instantaneously so the
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